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Americans are in deeper in debt than at any time in our history. For many, debt has become a critical safety valve in financial emergencies. For others, it’s a useful tool for managing the cash flow ups and downs that come from seasonal work or a job that doesn’t provide a steady income. Without mortgage debt, few people would be able to own a home.

And then there are those who just don’t get it: No matter how easy lenders make it for you to borrow, you’re eventually going to have to pay it back.

But what if someone you know is in the latter category — falling further behind every day? What should you do? This week, one reader wants to know: Should I lend more money to bail out my in-laws? If not, what can I do?

My wife and I have been married for six years. ... Her parents have gotten themselves into a situation where I just don't see an easy resolution. With $71,000 left on their mortgage, they refinanced and took out $100,000. … They did it again and invested $100,000 in a business venture. ... They then decided to take out a home equity line for $52,000. They have over $20,000 in credit card debt at 16 percent. They put their car up for collateral for a loan for $15,000. They borrowed $22,000 from a family friend, $9,000 from me, and who knows what else. ... They have no life insurance, $18,000 in one 401(k), and are nearing retirement 58 and 62 years of age. Their bills are twice as much as their income.

I can usually come up with a plan on how to recover from such situations, but this one seems too far gone for me. … I am conservative by nature, I am 32 years old and have been saving for all the things I know I will need in the future — my retirement, my children’s education, a larger house. Do I sacrifice my own savings to help out more? What can we do in this situation?
-- Sam, address withheld

Lending money to friends and family is often a perilous undertaking even with the most creditworthy and reliable borrowers. No matter how hard you try, it’s almost impossible to make this a business-like transaction. It’s always a good idea, for example, to write a quick note briefly outlining the terms for repayment. If the beneficiary of your family loan takes offense, just tell them it’s for “tax purposes.” The emotional distress you’ll avoid from any confusion down the road will more than make up for any awkwardness when you hand over the check.

In your case, it’s hard to see how throwing good money after bad is going to help anyone here. Your in-laws clearly have no idea how to handle debt; giving them more money is akin to buying them drugs just because they’re pleading for a fix.

Clearly, they need help learning how to better manage their financial affairs. The question is whether you’re the one who can provide that help. Giving them more money will only keep them headed in the wrong direction.

The first step would be to try to help them recognize their problem: that they need credit counseling, not more debt. You can start by politely informing them that you can’t lend them more money for precisely the reasons you’ve cited. You need to save for your own family’s needs.

It’s unlikely that refusing them more money alone will turn things around. For that, you should urge them to find a certified credit counselor through the National Federation for Credit Counseling. This national group of community-based agencies helps thousands of people like your in-laws every day.

If the situation is dire — if they’re at risk of losing their house, for example — urge them to act sooner rather than later. These days, lenders are busy working with hundreds of thousands of families at risk of default to figure out a way to keep them from losing their homes. The most important single step borrowers need to take is to call as soon as it looks like they’re getting into trouble. If they wait until they’ve missed too many payments, it becomes a lot harder to work out a solution with a happy ending.

As a member of the U.S. Navy, I am currently investing a small percentage of my wages into a TSP (thrift savings plan) account. I am 26 years old, currently married (wife is attending nursing school), and I have a 2-year-old son. What other types of investing would you suggest for an individual like myself? I feel that I am behind in getting this started. With my son growing up so fast, I am looking towards the future and him attending college. -- Dennis S., Goose Creek, S.C.

First off, congratulations on getting started. Some people — especially financial advisers trying to sell you their products and services — tend to overcomplicate the process of saving for college or retirement. The hardest part isn’t so much deciding what to do with the money. The hardest part is saving the money — especially with a growing family.

The most important thing on the saving side is to make sure you take full advantage of any and all accounts that help you save faster. For civilians, this starts at work with either a 401(k) plan. For those in the military, the equivalent account is a thrift savings plan, or TSP, which also covers federal government employees. Before you start looking for alternatives, make sure you're taking maximum advantage of these accounts. That's because no other investment plan will supercharge your savings with matching contributions — for every dollar you kick in up to a limit, Uncle Sam (or your employer, usually) will give you another one. (Clarification: If you're in uniform, unfortunately, matching contributions are only available to some "critical specialities" designated by the secretary repsonsible for each service. )

For college savings, you may want to look into a so-called 529 account. These are offered by most states and give you tax breaks and other incentives for money used to pay for tuition and other college expenses. You can also set up an account in your child's name under the Uniform Gift to Minors Act (a so-called UGMA account) that taxes investments at the child's rate. (The downside is that when your child turns 18, they get control over the money.) One of our favorite sites for information on college savings is

If you set up your own investment account, you'll probably want to start with managed funds (which pick stocks for you) or index funds (which have lower fees and just invest in all the stocks of a specific index, like the Standard & Poor's 500). Just like your TSP, the safer investments usually give you a lower return. So spread your savings around. Don't keep everything in stocks; put some money in bonds and maybe some in funds that invest overseas. There are a number of good Web sites out there to get you started. Companies like Fidelity and Charles Schwab that cater to small investors have lots of information and tools to learn more.

And while it doesn't hurt to start investing outside your TSP, so far this year the five managed funds you get to choose from under your plan have done pretty well. The Government Securities account, which invests in U.S. Treasuries, is up 3.7 percent so far this year; the Fixed Income account, which invests in other types of bonds, is up 4.2 percent; the Common Stock fund is ahead by 10.1 percent; the Small Cap fund — which invests in smaller, fast-growing companies — is up by 10.9 percent; and the International fund is up 13.8 percent.